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Critical Review on Service Marketing

Critical Review on Service Marketing

Introduction

It is becoming increasingly difficult to ignore the fact that the industry of hospitality and tourism is one of the most rapidly developing business sectors worldwide. Hotel and travel business is closely associated with service marketing. Services are the primary selling force in this industry, which is why many companies pay a particular attention to that aspect. One of such companies is TUI Group, which operates mainly in Germany. This country is known to have a developed economy and growing rates of hospitality and travel market capacity. That is why TUI Group has to address an integrated complex of issues to make service marketing its competitive advantage. As follows, the following paper focuses on a critical review of TUI Group’s service marketing practices and methodology of their use for gaining competitive advantages.

Brief Overview of the Country

Once Germany is chosen as the base country of the company under discussion, the basic hospitality and travel market information should be outlined. To begin with, Germany hosts 38 UNESCO-certified objects and possesses a comprehensive network of ground, air, and ICT infrastructure, as well as cultural resources, and health-hygiene facilities (IXPOS 2016). Germany provides first-class travel and hospitality services for domestic as well as external trips. It is an attractive market with a reasonable degree of competition as well as a proactive demand on tourism.

German market of tourism and hospitality defines its trends on new experiences in dining and entertainment, which is why many restaurants provide cosy environments with exquisite menus, a mixture of traditional and light scale international cuisine (IXPOS 2016). Likewise, German chains of fast food offer snacks of high quality. The same tendency can be observed in the hotel and accommodation segment. German market focuses on delivery of memorability, reliability, and affordability of hotel chains (IXPOS 2016). The average price of a German hotel is 91 euros per night, which is lower in other countries of the European Union (IXPOS 2016). It is becoming increasingly obvious that market capacity of German tourism and hospitality sector is fairly strong. In fact, 70% of long-term holidays or vacations are spent on a trip by Germans. Such trip bookings usually involve periods longer than 5 days, which is why Germany possesses a constant market potential (IXPOS 2016).

On a separate note, it is fair to mention business travel. The recent statistics suggest that 91% of midscale and upper midscale bookings were made for business purposes (IXPOS 2016). Since Germany is a worldwide-known platform for business initiatives of the international level, a substantial degree of reliance on business travel segment is apparent. Nevertheless, mainstream tourism is still the leading segment, especially under circumstances of economic growth and welfare of German citizens. It is interesting to admit that German market has gained the following characteristics:

  • Hospitality segment generated 69.6 billion euros from 225,000 business entities in recent years (IXPOS 2016);
  • The food and catering services have gained 38.6 billion EUR and 24.1 billion respectively (IXPOS 2016);
  • Tourism related expenditures have gained more than 278 billion EUR, and 87% of them are domestic requests (IXPOS 2016);
  • Germany is the 2nd travel destination, at least among the European Union countries (IXPOS 2016);
  • Citizens spend more than 65.3 billion EUR on trips abroad, meanwhile 29.7 billion EUR were earned because of foreign travellers (IXPOS 2016).

Organization’s Marketing Practices

TUI Group practices its custom integrated service package. To be specific, unique travel services are provided to customers through a presence of direct distribution channels, a diverse and strong portfolio of hotel chains, as well as transport, (TUI Group 2016). The main driving force of the company’s service marketing, however, is profound marketing research. TUI Group collects any available information related to its target segments, arranges it, and processes for creating decision-making patterns (Middleton et al. 2009). According to these patterns, TUI Group formulates its specified marketing mixes aimed at each target segment of its potential audience.  Generally speaking, the corporation’s marketing research facilitates satisfaction of customer demands and optimises services offered.

Without a doubt, TUI Group deploys a distinct marketing tool for making a profit-generating market research. As a matter of fact, the company implemented a unified e-marketing platform. Among a wide range of platforms, the corporation chose HubSpot application beause of its flexible and multi-purpose functionality (HubSpot 2016). First of all, the company establishes communication with its customers throughout diverse content management, which includes blogging, landing pages, social media, etc. As a consequence, traffic across TUI Group’s brand websites increased up to 50%, monthly leads of brands grew by 20%, and presale revenues increased by 106% (HubSpot 2016). Furthermore, the company personalises smart content for its customers, so that they do not have to repeat the same actions after the first engagement with the company’s services (HubSpot 2016). TUI Group’s customers are provided with flexible information presented in various formats. As a result, customers choose the most apt services. This strategy is particularly effective because many hospitality and travel services spoil their image by delivering content and information inappropriately. In addition, TUI Group uses a Marketing Automation Tool, which conducts segmentation of customers according to travel destinations and the week of a trip (HubSpot 2016). Practicing e-marketing tools for facilitation of its services resulted in a 106% increase in revenue for each specific service in comparison with previous years (HubSpot 2016).

PESTEL Analysis

In order to start the PESTEL analysis, political perspective should be discussed. Nowadays, Germany does not presuppose any political implications for hospitality and travel businesses. However, a situation with Syrian refugees can be taken in consideration. This evidence is apparent but it does not have any political agenda in that regard (Miles 2014). That is why TUI Group does not feel any political pressure. As for economics in Germany, it is the most favourable factor. Travel and tourism in Germany generated 7,6 trillion U.S. dollars within the last 25 years. This amount comprises almost 10% of the global GDP (World Tourism and Travel Council 2015). Moreover, Germany is predicted to increase its global contribution to 3.7% in terms of hospitality and tourism sector only (World Tourism and Travel Council 2015). Social issues in Germany, however, create an ambiguous situation. The wave of Syrian refugees causes a need for low-cost accommodations and transportation, so this market niche needs an immediate intervention. Conversely, general economic impacts and cross-cultural concerns prevent people from travelling to Germany (Manz & Panayi 2013). This tendency is not persistent, but such a possibility requires independent attention.

Technologic perspective implies that travel and hospitality businesses should rely heavily on proactive use of e-marketing, social media, and content management. In addition, an upcoming wave of digital revolution presupposes a more active use of such information technologies as Cloud Computing and Business Intelligence (Benckendorff, Sheldon, & Fesenmaier 2014). It has become abundantly clear, that TUI Group seems to comply with these trends. The popularity of information technologies and digitalisation of business is compensated by a respective trend on environmental sustainability in business. It is particularly important to hospitality and tourism business, which is why many companies implement sustainable models and green strategies (Cottrel, Vaske, & Roemer 2013). Again, TUI Group follows its own model of sustainability, which is why it does not lose to similar companies, especially within Germany.  Eventually, the legal perspective does not provide any insight concerning hospitality and travel business in Germany (Singh 2010). TUI Group did not experience any of significant legal disputes. Therefore, it is fair to say that legal environment is also especially favourable for implementing the company’s service marketing strategy. Overall, PESTEL analysis demonstrates almost entirely trouble-free environment for market performance within Germany.

Theoretical Framework

The basic rules of service marketing require an initial establishment of a long-term relationship with its customers (Hoffman & Bateson 2011). This communication does not have to involve a constant physical presence of a customer at a restaurant, hotel, or airline. Instead, offering various and relevant services in passive form through advertising, blogging, social media, and other means of communication with customers will create a compelling impression of a trademark. That is why various services should be presented in different ways (Hoffman & Bateson 2011). A single channel of distribution does not have to work for all types of services. This rule presupposes a meaningful market research and relevant segmentation, otherwise a company risks to offer redundant services to a wrong target audience (Hoffman & Bateson 2011). Thiss is especially important to services because they cannot be shared or resold. A customer requires satisfaction of their non-material desires, so that they strongly discourage annoying offers, which they surely do not need, at least at the moment.

That is why service marketing is expected to be well-balanced. A company has to offer services, which it can deliver with a sufficient level of quality (Hoffman & Bateson 2011). On the same note, creation of additional services is a risky action because a provision of service just to add price value is unethical and redundant in the sense of marketing. Consequently, any customer is the primary decision-maker. Thus, they behave according to the problem-solving pattern (Verma 2012). A customer refers to a particular service when they need to solve a related problem. That is why a company is required to offer services, which can solve a customer’s problem. In general, a success of service marketing depends heavily on appropriate forecasts and response to customer behaviour (Verma 2012).

Additionally, customer behaviour is determined by such factors as self-reflection, risk, social acceptance, and significance of a service (Verma 2012). This way, service marketing mix is largely determined by relevant segmentation and chosen means of service presentation.

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Critical Analysis and Evaluation

In regards to appropriateness of service marketing, TUI Group demonstrates accurate decision-making. The company relevantly focuses on e-marketing platforms, because they initially facilitate choice of services for the target audiences. TUI Group managed to respond adequately and promptly to the popularity of optimized smart content and flexible presale services (Tsioutsou & Goldsmith 2012). The company provides its customers with all the necessary information related to their segmentation. As a result, the customers easily make a decision in favour of TUI Group’s services. Implementation of effective communication with the customers via HubSpot platform includes not only advertising but blogging, social media, and landing pages. The company’s services are presented directly to the target audience, so that the customers are aware of particular problem-solving advantages (Tsioutsou & Goldsmith 2012). Interestingly, TUI Group has not incorporated a socialising tool. HubSpot boosts communication of the company with the target segment, while communication within the segment is almost neglected.

It is hard to argue that such service marketing practices result in high-scale profitability as well as widened target segmentation. Still, this approach lacks mitigation of potential risks and application of risk management as a whole (Page 2011). Besides that, HubSpot justifies its cost effectiveness by substantial profits, while the initial reduction and optimisation of expenditures is present beyond the company’s marketing scope. That is why TUI Group is advised to implement a flexible risk management model and cost-effective approach for its market input (Page 2011). Actually, it is possible to do that by using the same platform, once it processes all available marketing data.  Information is the driving force of the marketing decision-making and segmentation, which gives TUI Group a strong competitive advantage. This platform, however, could also have been transformed into a more interactive mode of marketing mix. In addition to segmenting and distributing services to its primary audiences, the platform can become a tool for service development (Kapoor, Paul, & Halder 2011). Marketing Automated Tool is able to contextualise all data, making it more clear and providing interactive judgements based on customer surveys.

Conclusion

It is appropriate to assert that TUI Group deploys proactive service marketing. First of all, the company conducts a profound marketing research and target segmentation. As a consequence, TUI Group provides its customers with flexible, optimised, and integrated services. Use of HubSpot marketing platform is a central driving force for gaining basic competitive advantage. That is why orientation at e-marketing platform should be recognised as the most prominent means of service marketing, which is embedded in marketing strategy of TUI Group. It is reasonable to say that because TUI Group is a German company, it deals with a large market segment. Thus, the use of e-marketing platforms for service marketing is a leading method for addressing a larger context of marketing performance. The existing model of service marketing in TUI Group is surely effective, but the paper has introduced substantial suggestions for its further advancement. Finally, additional studies should discover ways of implementing these recommendations.

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